How do you spell ESG? While it is a simple question, oftentimes simple questions are the hardest to answer.
It does not matter what industry you work in. Each has its unique language, sayings, and code that is difficult to understand to those not adequately versed. The risk and compliance domains are no different. Risk and compliance functions are awash in techno-speak, anacronyms, abbreviations, and slang that, to the outsider listening in, the conversation can sound like listening to aliens from another planet. But if you can know the “alphabet” of your domain, conversations can flow as naturally as walking down the street.
So, the answer to the simple question of how do you spell ESG depends on your understanding of the ESG alphabet.
The good news is that the ESG alphabet is quite simple and easy to learn. So let's start with the basics: what does ESG mean? ESG stands for environmental, social, and governance. ESG is a risk management tool to help stakeholders (investors, employees, society) better understand the organizations they engage with regarding social and environmental factors such as the impact on the environment, diversity, and equity policies and practices.
Now that we have answered that question, how can you learn to speak ESG? We will stick with the basics for this lesson and focus on the five most common ESG standards and the primary framework that are part of nearly every ESG conversation.
GRI - The Global Reporting Initiative (known as GRI) is an international independent standards organization that helps businesses, governments, and other organizations understand and communicate their impacts on issues such as climate change, human rights, and corruption.
SASB - The Sustainability Accounting Standards Board (SASB) standard guides companies' disclosure of financially material sustainability information to their investors. The Standards identify the subset of ESG issues most relevant to financial performance in each industry.
CDSB - The Climate Disclosure Standards Board (CDSB) standard provides investors and financial markets material information by integrating climate change-related information into mainstream financial reporting.
CDP - The CDP (formerly the Carbon Disclosure Project) standard helps companies and cities disclose their environmental impact. It aims to make environmental reporting and risk management a business norm, driving disclosure, insight, and action towards a sustainable economy.
IIRC - The International Integrated Reporting Council (IIRC) standard helps demonstrate the linkages between an organization's strategy, governance, and financial performance and the social, environmental, and economic context within which it operates. By reinforcing these connections, Integrated Reporting can help businesses make better-informed decisions regarding sustainability and enable investors and other stakeholders to understand how an organization is performing.
TCFD - While many ESG frameworks are being discussed today, the TCFD (Task Force on Climate-Related Financial Disclosures) framework has risen to the top and has achieved global recognition. This framework helps public companies and other organizations more effectively disclose climate-related risks and opportunities through their existing reporting processes and disclose the organization's governance around climate-related risks and opportunities.
You now know the basics of the ESG alphabet. These ESG standards and frameworks make up the core of most all ESG conversations. Understanding what these anacronyms stand for and how they can help guide your organization's ESG programs will catapult your ability to lead strategic and impactful ESG conversations with your organization's leadership.
Want to learn more about ESG? We invite you (and your ESG colleagues) to watch a replay of Archer’s Peadar Duffy, Global ESG Practice Lead, and French Caldwell, Chief Strategy Officer for Archer, for a discussion of the critical factors and concepts risk managers need to know before implementing an ESG solution to best leverage their organization’s risk and compliance platform.